Essentials of strategic management the quest for competitive advantage 5th edition gamble test bank

Chapter 02
Strategy Formulation, Execution, and Governance

Multiple Choice Questions

1.

Which one of the following is not one of the five stages of an ongoing, continuous strategic
management process?

A. forming a strategic vision of the company's future direction and focus
B. setting objectives to measure progress toward achieving the strategic vision
C. crafting a strategy to achieve the objectives and get the company where it wants to go
D. developing a profitable business model
E. implementing and executing the chosen strategy efficiently and effectively
2.

Which of the following is an integral part of the managerial process of crafting and executing
strategy?

A. developing a proven business model
B. setting objectives and using them as yardsticks for measuring the company's performance and
progress
C. deciding how much of the company's resources to employ in the pursuit of sustainable competitive
advantage
D. communicating the company's mission and purpose to all employees
E. deciding on the composition of the company's board of directors

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3.

When companies adopt the strategy making, strategy execution process, it requires they start by

A. developing a strategic vision, mission, and values.
B. developing a proven business model, deciding on the company's top management team, and
crafting a strategy.
C. setting objectives, developing a business model, crafting a strategy, and deciding how much of the
company's resources to employ in the pursuit of sustainable competitive advantage.
D. coming up with a statement of the company's mission and communicating it to all employees,
setting objectives, selecting a business model, and monitoring developments and initiating
corrective adjustments to the business model when necessary.
E. deciding on the company's board of directors, setting financial objectives, crafting a strategy, and
choosing what business approaches and operating practices to employ.
4.

The strategic management process is shaped by

A. management's strategic vision, strategic and financial objectives, and strategy.
B. the decisions made by the compensation and audit committees of the board of directors.
C. external factors such as the industry's economic and competitive conditions and internal factors
such as the company's collection of resources and capabilities.
D. a company's customer value proposition and profit formula.
E. actions to strengthen competitive capabilities and correct weaknesses, actions to strengthen
market standing and competitiveness by acquiring or merging with other companies, and actions
to enter new geographic or product markets.
5.

When a company is confronted with significant industry change that mandates radical revision of its
strategic course, the company is said to have encountered a(n)

A. learning and growth perspective.
B. strategic inflection point.
C. strategic roadblock.
D. new strategic opportunity.
E. opportunity for corporate entrepreneurship.

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6.

A company's strategic plan consists of

A. its balanced scorecard and its business model.
B. a vision of where it is headed, a set of performance targets, and a strategy to achieve them.
C. its strategy and management's specific, detailed plans for implementing it.
D. a company's plans for improving value-creating internal processes.
E. a strategic vision, a strategy, and a business model.
7.

The strategy-making, strategy-executing process

A. is usually delegated to members of a company's board of directors so as not to infringe on the time
of busy executives.
B. includes establishing a company's mission, developing a business model aimed at making the

company an industry leader, and crafting a strategy to implement and execute the business model.
C. embraces the tasks of developing a strategic vision, setting objectives, crafting a strategy,
implementing and executing the strategy, and then monitoring developments and initiating
corrective adjustments in light of experience, changing conditions, and new opportunities.
D. is principally concerned with sizing up an organization's internal and external situation, so as to be
prepared for the challenge of developing a sound business model.
E. is primarily the responsibility of top executives and the board of directors; very few managers
below this level are involved.
8.

A company's strategic vision concerns

A. a company's directional path and future product-customer-market-technology focus.
B. why the company does certain things in trying to please its customers.
C. management's story line of how it intends to make a profit with the chosen strategy.
D. "who we are and what we do."
E. what future actions the enterprise will likely undertake to outmaneuver rivals and achieve a
sustainable competitive advantage.

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9.

Management's strategic vision for an organization

A. charts a strategic course for the organization ("where we are going") and outlines the company's
future product-customer-market-technology focus.

B. describes in fairly specific terms the organization's business model, strategic objectives, and
strategy.
C. spells out how the company will become a big moneymaker and boost shareholder value.
D. addresses the critical issue of "why our business model needs to change and how we plan to
change it."
E. spells out the organization's strategic moves that will be undertaken to achieve competitive
advantage.
10. Top management's views about where the company is headed and what its future product-customermarket-technology will be

A. indicates what kind of business model the company is going to have in the future.
B. constitutes the strategic vision for the company.
C. signals what the firm's strategy will be.
D. serves to define the company's mission.
E. indicates what the company's long-term strategic plan is.
11. Which one of the following is not an accurate attribute of an organization's strategic vision?

A. a clearly articulated view of "where we are going"
B. describing the company's future product-customer-market-technology focus
C. pointing an organization in a particular direction and charting a strategic path for it to follow
D. providing managers with a reference point for making strategic decisions
E. specifying how the company intends to implement and execute its business model

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12. Well-conceived visions are

A. distinctive.

B. specific to a particular organization.
C. free of generic, feel-good statements.
D. not innocuous one-sentence statements.
E. All of these choices are correct.
13. Which of the following are characteristics of an effectively worded strategic vision statement?

A. graphic, directional, and focused
B. challenging, competitive, and "set in concrete"
C. balanced, responsible, and rational
D. realistic, customer-focused, and market-driven
E. achievable, profitable, and ethical
14. Which one of the following is not a characteristic of an effectively worded strategic vision statement?

A. directional (is forward-looking, describes the strategic course that management has charted and
the kinds of product-market-customer-technology changes that will help the company prepare for
the future)
B. easy to communicate (is explainable in 10 to 15 minutes, can be reduced to a memorable slogan)
C. graphic (paints a picture of the kind of company management is trying to create and the market
position or positions the company is striving to stake out)
D. consensus-driven (commits the company to a "mainstream" directional path that most all
stakeholders will enthusiastically support)
E. focused (is specific enough to provide guidance to managers in making decisions and allocating
resources)

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15. Which of the following is not a common shortcoming of company vision statements?

A. vague or incomplete—short on specifics
B. focused and narrow—exclusive to a specific direction
C. bland or uninspiring
D. not distinctive—could apply to most any company (or at least several others in the same industry)
E. too reliant on superlatives (best, most successful, recognized leader, global or worldwide leader,
first choice of customers)
16. Which of the following are common shortcomings of company vision statements?

A. too broad, vague or incomplete, bland/uninspiring, not distinctive, and too reliant on superlatives
B. unrealistic, unconventional, and unbusinesslike
C. too specific, too inflexible, and can't be achieved in five years
D. too broad, too narrow, and too risky
E. not customer-driven, out-of-step with emerging technological trends, and too ambitious
17. Effectively communicating the strategic vision down the line to lower-level managers and employees
has the value of

A. not only explaining "where we are going and why" but, more importantly, also inspiring and
energizing company personnel to unite to get the company moving in the intended direction.
B. helping company personnel understand why "making a profit" is so important.
C. making it easier for top executives to set strategic objectives.
D. helping lower-level managers and employees better understand the company's business model.
E. All of these choices are correct.

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18. The benefit of a vivid, engaging, and convincing strategic vision is

A. its ability to crystallize top management's own view about the company's long-term direction.
B. it reduces the risk of rudderless decision making by managers at all levels of the organization.
C. it helps an organization prepare for the future.
D. its ability to unite company personnel behind managerial efforts to get the company moving in the
intended direction.
E. All of these are important benefits of an effective strategic vision.
19. A company's mission statement typically addresses which of the following questions?

A. Who are we? What do we do? and Why are we here?
B. What objectives and level of performance do we want to achieve?
C. Where are we going and what should our strategy be?
D. What approach should we take to achieve sustainable competitive advantage?
E. Why have we chosen a particular business model to achieve our objectives and our vision?
20. Ideally, a company's mission statement should be sufficiently descriptive and include which of the
following?

A. Identify the company's services and products to give the company its own identity.
B. Relate to the buyer's needs that the company seeks to satisfy.
C. Identify the customer or market that the company intends to serve.
D. Specify the approach taken by the company to satisfy its customer's needs.
E. All of these choices are correct.

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21. The difference between the concept of a company mission statement and the concept of a strategic
vision is that

A. a mission statement typically concerns a company's present business scope ("who we are and
what we do"), whereas the principal concern of a strategic vision is with the company's future
business scope (long-term direction and future product-customer-market-technology focus).
B. the mission is to make a profit, whereas a strategic vision concerns how to attract customers.
C. a mission statement deals with what to accomplish on behalf of shareholders and a strategic vision
concerns what to accomplish on behalf of customers.
D. a mission statement concerns what to do to achieve short-run objectives and a strategic vision
concerns what to do to achieve long-run performance targets.
E. a mission statement deals with "where we are headed," whereas a strategic vision provides the
critical answer to "how will we get there."
22. A company's values concern

A. whether and to what extent it intends to operate in an ethical and socially responsible manner.
B. how aggressively it will seek to maximize profits and enforce high ethical standards.
C. the beliefs and operating principles built into the company's "balanced scorecard" for measuring
performance.
D. the beliefs, traits, and behavioral norms that company personnel are expected to display in
conducting the company's business and pursuing its strategic vision and mission.
E. the beliefs, principles, and ethical standards that are incorporated into the company's strategic
intent and business model.

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23. A company's values relate to such things as

A. how it will balance its pursuit of financial objectives against the pursuit of its strategic objectives.

B. how it will balance the pursuit of its business purpose/mission against the pursuit of its strategic
vision.
C. fair treatment, integrity, ethical behavior, innovativeness, teamwork, top-notch quality, superior
customer service, social responsibility, and community citizenship.
D. whether it will emphasize stock price appreciation or higher dividend payments to shareholders,
and whether it will put more emphasis on the achievement of short-term performance targets or
long-range performance targets.
E. All of these choices are correct.
24. The managerial purpose of setting objectives includes

A. converting the strategic vision into specific performance targets.
B. using the objectives as yardsticks for tracking the company's progress and performance.
C. challenging the organization to perform at its full potential and deliver the best possible results.
D. establishing deadlines for achieving performance results.
E. All of these choices are correct.
25. A company needs financial objectives

A. to overtake key competitors on such important measures as net profit margins and return on
investment.
B. because without adequate profitability and financial strength, the company's ultimate survival is
jeopardized.
C. to indicate to employees that financial objectives always take precedence over strategic
objectives.
D. to convince shareholders that top management is acting in their interests.
E. to translate the company's business model into action items.

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26. Strategic objectives

A. are more essential in achieving a company's strategic vision than are financial objectives.
B. are generally less important than financial objectives.
C. are more difficult to achieve and harder to measure than financial objectives.
D. relate to strengthening a company's overall market standing and competitive vitality.
E. help managers track an organization's true progress better than do financial objectives.
27. A balanced scorecard for measuring company performance

A. entails putting equal emphasis on financial and strategic objectives.
B. entails striking a balance between financial objectives and strategic objectives.
C. balances the drive for profits with social responsibility obligations.
D. prevents the drive for achieving strategic objectives from overwhelming the pursuit of financial
objectives.
E. entails creating a set of financial objectives balanced among profitability measures and liquidity
measures.
28. A balanced scorecard that includes both strategic and financial performance targets is a conceptually
strong approach for judging a company's overall performance because

A. financial performance measures are lagging indicators that reflect the results of past decisions and
organizational activities, whereas strategic performance measures are leading indicators of a
company's future financial performance.
B. it entails putting equal emphasis on good strategy execution and good business model execution.
C. a balanced scorecard approach pushes managers to avoid setting objectives that reflect the
results of past decisions and organizational activities, and, instead, to set objectives that will serve
as leading indicators of a company's future financial performance.
D. it assists managers in putting roughly equal emphasis on short-term and long-term performance
targets.
E. it more or less forces managers to put equal emphasis on financial and strategic objectives.

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29. Why should long-run objectives take precedence over short-run objectives?

A. The focus is placed on improving performance in the near term.
B. Long-run objectives are necessary for achieving long-term performance and stand as a barrier to
undue focus on short-term results.
C. Long-run objectives will satisfy shareholder expectations for progress.
D. Long-run objectives will force the company to deliver performance improvement in the current
period.
E. None of these are correct.
30. Company objectives

A. are needed only on a companywide basis related to a company's short-term and long-term
profitability.
B. need to be broken down into performance targets for each of its separate businesses, product
lines, functional departments, and individual work units.
C. play the important role of establishing the direction in which the company needs to be headed.
D. are important because they help guide managers in deciding what the company's strategy map
should look like.
E. should be set in a manner that does not conflict with the performance targets of lower-level
organizational units.
31. A company needs performance targets or objectives

A. for its operations as a whole and for each of its separate businesses, product lines, functional
departments, and individual work units.

B. because they provide parameters for the company's strategy map.
C. to unify the company's strategic vision and business model.
D. to help guide managers in deciding what strategic path to take in the event that a strategic
inflection point is encountered.
E. to prevent lower-level organizational units from establishing their own objectives.

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32. The task of stitching together a strategy

A. entails addressing a series of "hows": how to grow the business, how to please customers, how to
outcompete rivals, how to respond to changing market conditions, and how to achieve strategic
and financial objectives.
B. is primarily an exercise in deciding which of several freshly emerging market opportunities to
pursue.
C. should be dictated by what is comfortable to management from a risk perspective and what is
acceptable in terms of capital requirements.
D. requires trying to copy the strategies of industry leaders as closely as possible.
E. is mainly an exercise in good planning.
33. Crafting strategy requires

A. a collaborative effort that includes managers in various position at various organizational levels.
B. executive management involvement only.
C. participation by all employees.
D. a collaborative effort between the CEO and board members only.
E. All of these choices are correct.
34. Corporate strategy

A. is primarily concerned with strengthening a company's market position and building competitive
advantage.
B. is subject to being changed much less frequently than either a company's objectives or its mission
statement.
C. should be based on a flexible strategic vision and mission.
D. ensures consistency in strategic approach among businesses of a diversified, multibusiness
corporation.
E. determines balanced scorecard financial and strategic objectives.

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35. Business strategy concerns

A. strengthening the company's market position and building competitive advantage.
B. ensuring consistency in strategic approach among the businesses of a diversified company.
C. selecting a business model to use in pursuing business objectives.
D. selecting a set of financial and strategic objectives for a particular line of business.
E. choosing appropriate internal business processes for a specific line of business.
36. In a single-business company, the strategy-making hierarchy consists of

A. business strategy, divisional strategies, and departmental strategies.
B. business strategy, functional strategies, and operating strategies.
C. business strategy and operating strategy.
D. managerial strategy, business strategy, and divisional strategies.
E. corporate strategy, divisional strategies, and departmental strategies.
37. Functional strategies

A. specify what actions a company should take to resolve specific strategic issues and problems.
B. concern the actions, approaches, and practices related to particular functions or processes within
a business.
C. are concerned with how to unify the firm's several different operating strategies into a cohesive
whole.
D. are normally crafted by the company's CEO and other senior executives.
E. None of these are correct.

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38. Functional strategies

A. unify the company's various operating-level strategies.
B. specify how to build and strengthen the skills, expertise, and competencies needed to execute
operating-level strategies successfully.
C. support and add power to the corporate-level strategy.
D. add relevant detail to the "hows" of a company's business-level strategy and specify what
resources are needed to put the strategy into action.
E. create the chief elements of the company's strategy map.
39. Operating strategies concern

A. what the firm's operating departments are doing to unify the company's functional and business
strategies.
B. the specific plans for building competitive advantage in each major department and operating unit.
C. the relatively narrow strategic initiatives and approaches for managing key operating units within a
business and for performing strategically significant operating tasks.

D. how best to carry out the company's corporate strategy.
E. how best to implement and execute the company's different business-level strategies.
40. Which of the following is not among the principal managerial tasks associated with managing the
strategy execution process?

A. ensuring that policies and procedures facilitate rather than impede effective execution
B. creating a company culture and work climate conducive to successful strategy implementation and
execution
C. surveying employees on how employee job satisfaction can be improved
D. exerting the internal leadership needed to drive implementation forward
E. tying rewards and incentives directly to the achievement of performance objectives

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41. Management is obligated to monitor new external developments, evaluate the company's progress,
and make corrective adjustments in order to

A. determine whether the company has a balanced scorecard for judging its performance.
B. decide whether to continue or change the company's strategic vision, objectives, strategy and/or
strategy execution methods.
C. determine what changes should be made to its customer value proposition.
D. determine whether the company's business model is well matched to changing market and
competitive circumstances.
E. stay on track in achieving the company's mission and strategic vision.
42. A company's direction, objectives, and strategy

A. have to be revisited any time internal conditions warrant.

B. are never final as it is an ongoing process.
C. are not a now-and-then task.
D. have to be revisited whenever a firm encounters disruptive changes in its environment.
E. All of these choices are correct.
43. Proficient strategy execution

A. is always the product of much organizational learning.
B. is achieved unevenly, coming quickly in some areas and more slowly in others.
C. entails vigilantly searching for ways to improve performance.
D. is an ongoing process, not an every-now-and-then task.
E. All of these choices are correct.

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44. The primary roles/obligations of a company's board of directors in the strategy-making, strategyexecuting process include

A. playing the lead role in forming the company's strategy and then directly supervising the efforts
and actions of senior executives in implementing and executing the strategy.
B. providing guidance and counsel to the CEO in carrying out his or her duties as chief strategist and
chief strategy implementer.
C. overseeing the company's financial accounting and reporting practices, evaluating the caliber of
senior executives' strategy-making and strategy-executing skills, and instituting a compensation
plan that rewards top executives for results that serve shareholder interests.
D. working closely with the CEO, senior executives, and the strategic planning staff to develop a
strategic plan for the company.
E. reviewing and approving the company's business model, and reviewing and approving the
proposals and recommendations of the CEO as to how to execute the business model.

45. The obligations of an investor-owned company's board of directors in the strategy-making, strategyexecuting process include

A. coming up with compelling strategy proposals to debate against those put forward by top
management.
B. taking the lead in formulating the company's strategic plan but then delegating the task of
implementing and executing the strategic plan to the company's CEO and other senior executives.
C. taking the lead in developing the company's business model and strategic vision.
D. overseeing the company's financial accounting and financial reporting practices and evaluating the
caliber of senior executives' strategy-making/strategy-executing skills.
E. approving the company's operating strategies, functional-area strategies, business strategy, and
overall corporate strategy.

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46. Which one of the following is not among the chief duties or responsibilities of a company's board of
directors insofar as the strategy-making, strategy-executing process is concerned?

A. Hire and fire senior-level executives and work with the company's chief strategic planning officer to
improve the company's performance.
B. Inquire about and exercise strong oversight over the company's direction, strategy, and business
approaches.
C. Evaluate the caliber of senior executives' strategy-making/strategy-executing skills.
D. Institute a compensation plan for top executives that rewards them for actions and results that
serve stakeholders' interests and most especially those of shareholders.
E. Oversee the company's financial accounting and financial reporting practices.

Short Answer Questions

47. What are the five stages of the strategy-making, strategy-executing process and what does each one
involve?

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48. Define and briefly explain what is meant by each of the following terms:
a. strategic inflection point
b. strategic vision
c. strategic objective
d. strategic plan
e. balanced scorecard

49. A well-conceived strategic vision helps prepare a company for the future. True or false? Explain and
justify your answer.

50. Explain why an organization needs a strategic vision. What purpose does a strategic vision serve?

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51. What is the difference between a mission statement and a strategic vision?

52. What is the meaning of the term "balanced scorecard"? What are the merits of using a balanced
scorecard in judging a company's performance?

53. What are the two types of objectives included in the balanced scorecard? Define and provide five
examples of each.

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54. The achievement of financial objectives tends to be a lagging indicator of a company's performance
while the achievement of strategic objectives tends to be a leading indicator of a company's future
financial performance. True or false? Support and explain your answer.

55. Explain why a company's strategy is really a bundle of strategies.

56. A single-business company has three levels of strategy. Name and describe each level.

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57. Identify and briefly discuss at least three obligations of a company's board of directors in corporate
governance and the strategy formulation, strategy execution process.

58. Identify and briefly discuss at least two examples of faulty oversight by a company's board of
directors in corporate governance and/or the strategy formulation, strategy execution process.

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Chapter 02 Strategy Formulation, Execution, and Governance Answer Key

Multiple Choice Questions

1.

Which one of the following is not one of the five stages of an ongoing, continuous strategic
management process?

A. forming a strategic vision of the company's future direction and focus
B. setting objectives to measure progress toward achieving the strategic vision
C. crafting a strategy to achieve the objectives and get the company where it wants to go
D. developing a profitable business model
E. implementing and executing the chosen strategy efficiently and effectively
Figure 2.1 displays this five-stage process: (1) developing a strategic vision, (2) setting objectives,
(3) crafting strategy, (4) implementing and executing the chosen strategy, and (5) evaluating and
analyzing the external environment and the company's internal situation and performance.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs
to head and why.
Topic: The Strategy Formulation, Strategy Execution Process

2-22

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Education.


2.

Which of the following is an integral part of the managerial process of crafting and executing
strategy?

A. developing a proven business model
B. setting objectives and using them as yardsticks for measuring the company's performance and
progress
C. deciding how much of the company's resources to employ in the pursuit of sustainable
competitive advantage
D. communicating the company's mission and purpose to all employees
E. deciding on the composition of the company's board of directors
Figure 2.1 displays the five-stage process: (1) developing a strategic vision, (2) setting objectives,
(3) crafting strategy, (4) implementing and executing the chosen strategy, and (5) evaluating and
analyzing the external environment and the company's internal situation and performance.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs
to head and why.
Topic: The Strategy Formulation, Strategy Execution Process

2-23
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3.

When companies adopt the strategy making, strategy execution process, it requires they start by

A. developing a strategic vision, mission, and values.
B. developing a proven business model, deciding on the company's top management team, and
crafting a strategy.
C. setting objectives, developing a business model, crafting a strategy, and deciding how much of
the company's resources to employ in the pursuit of sustainable competitive advantage.
D. coming up with a statement of the company's mission and communicating it to all employees,
setting objectives, selecting a business model, and monitoring developments and initiating
corrective adjustments to the business model when necessary.
E. deciding on the company's board of directors, setting financial objectives, crafting a strategy,
and choosing what business approaches and operating practices to employ.
Figure 2.1 displays the five-stage process. The first step is developing a strategic vision, mission,

and values.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs
to head and why.
Topic: The Strategy Formulation, Strategy Execution Process

2-24

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4.

The strategic management process is shaped by

A. management's strategic vision, strategic and financial objectives, and strategy.
B. the decisions made by the compensation and audit committees of the board of directors.
C. external factors such as the industry's economic and competitive conditions and internal
factors such as the company's collection of resources and capabilities.
D. a company's customer value proposition and profit formula.
E. actions to strengthen competitive capabilities and correct weaknesses, actions to strengthen
market standing and competitiveness by acquiring or merging with other companies, and
actions to enter new geographic or product markets.
Figure 2.1 displays the five-stage process. Management's decisions that are made in the strategic

management process are shaped by the prevailing economic conditions and competitive
environment and the company's own internal resources and competitive capabilities as shown in
Figure 2.1 and described in detail in Table 2.1.

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs
to head and why.
Topic: The Strategy Formulation, Strategy Execution Process

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